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Tucson staff warn federal grant pause could threaten jobs as FY26 fee increases and water-rate plan roll out
Summary
City staff told the council the administration and courts have created uncertainty over federal grants; the city has $617.5 million in active federal awards and $283.9 million unspent, and expects fee increases and water-rate changes to boost certain funds in FY26.
Tucson city staff told the council on Feb. 19 that a federal pause on grant obligations and disbursements has left key programs and positions at risk while the city moves ahead with FY26 budgeting plans.
Business Services Director Angel Ozomolam and finance staff described an FY26 package that includes fee increases already approved to take effect July 1 — permit fees for planning and development services, fire, and transportation — expected to generate roughly $400,000 in additional revenue. Planning permit valuation assessment increases in Phase 2 are estimated to add about $133,000 in FY26.
Ozomolam warned that fees tied to dedicated funds cannot be reallocated to unrelated city needs, saying, “these are not revenues that are able to be reallocated to other needs of the city.” He briefed the council on Park Tucson, which saw its fund balance drained during the COVID-19 pandemic and finished FY24 with about a $404,000 deficit; a set of FY26 parking and street‑permit fee changes are projected to yield small incremental revenues for that fund.
The water utility will enter its third year of an approved four‑year plan that includes a 5.5% rate increase; staff projected multi‑year collection increases and emphasized water‑fund revenues are restricted to water purposes. Ozomolam presented a general‑fund projection of about $533.0 million and roughly $1.212 billion for other funds across the enterprise portfolio.
On federal funding, staff said the Biden administration’s Jan. 30 pause on obligations and disbursements — later subject to litigation — created uncertainty. The business services department reported the city had “617,500,000 in active federal awards” with an unspent balance of $283,900,000; staff said that figure covers capital and staff costs and that roughly 200 grant‑funded positions are linked to these awards. Departments cited as most exposed are police, fire, housing and community development, and transportation.
Mayor and council members asked for follow‑up data on how fee projections compared with FY23–FY25 actuals; staff agreed to provide backward and forward‑looking trend tables and more detail on permit revenue methodology. The city manager and business services department emphasized they are monitoring federal developments and planning internal contingencies to keep grant‑funded staff employed if federal disbursements change.
Ending: Staff said they will provide additional detail on FY25 projections and bring trend analyses of rate and fee collections to a future meeting so council can evaluate the assumptions that underlie FY26 revenue estimates.
